The expansion of enterprise software provider Salesforce (CRM 3.42%) has been relentless, and that has put the company at odds with Microsoft (MSFT 0.60%) many times. Since Microsoft CEO Satya Nadella took over a few years ago, the relationship between the two competitors has warmed compared with the cold war they used to wage. Salesforce and Microsoft customers can even integrate the two software platforms, a capability that is advertised on both companies' websites.
It seems the contest is heating up once again, though, as Salesforce's expansion gets more aggressive and Microsoft has made a cloud-based business model transformation. In September, each announced new software capabilities aimed at consolidating customer relationships into its own platform and not the other company's. It could be an early sign that the cloud computing industry is about to get a lot more competitive.
Subtle shots fired...again
Salesforce's subsidiary Quip -- a cloud-based collaboration tool armed with word processing and spreadsheets -- just added an alternative to Microsoft's PowerPoint called Slides. Since acquiring it back in 2016, Salesforce has continued to build out Quip's capabilities to the point that it's virtually a replacement for the basic work solutions in Microsoft's Office 365.
Microsoft's most recent addition is bigger news. The company announced it's adding artificial intelligence to its Dynamics customer service and marketing software. Salesforce has been a leader in AI for business with its Einstein platform, which powers insights and suggestions across the company's suite of software. Now Microsoft users will get something similar in their digital workspaces.
While that move was playing catch-up, Microsoft simultaneously announced a one-up: mixed-reality integration with Dynamics. The new software builds on the HoloLens device that Microsoft released two years ago. Companies can now use data from Dynamics to provide information in context to their workforces using the HoloLens. Salesforce is compatible with Facebook's Oculus Rift virtual reality headsets, but an out-of-the-box solution for enterprises is a first point scored for Microsoft.
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Cloud computing is the rage, but for how long?
Cloud computing, especially services geared toward business and enterprise, has been growing by leaps and bounds the last few years. The world economy is transitioning to digital, and the cloud is making it easier and cost effective for big businesses to make the switch. That has led to big gains for shareholders; the Vanguard Information Technology ETF's return of over 300% in the last decade is proof of that.
In the fast-growing digital economy, there's been plenty of elbow room for all players so far. Salesforce and Microsoft's recent software expansion announcements could be the latest indication that this is changing, though. The biggest contestants are shoring up their platforms to retain clients, and their diverse lists of offerings are starting to look less like differentiation and more like incremental sales additions. Earlier this year, Salesforce's acquisition of MuleSoft was its biggest to date by far. But plenty of other companies got there first -- like Microsoft, which operates the Flow data integration app. Atlassian and Slack's recent entanglement is another example of best-in-class software companies teaming up to prevent client migration to a rival platform.
That isn't necessarily an impending sign of trouble, especially for juggernauts like Salesforce and Microsoft. However, with the cloud computing industry getting crowded, the two companies playing copycat in an attempt to round out their software suites shows that a slowdown might be around the corner. Since many cloud companies are sacrificing profit now to maximize growth, some could get knocked down if the pace of digital adoption takes a breather.
